Health insurance companies are fresh out of ideas on how to save employers money. But saving employers money was never their primary purpose anyway. Their primary purpose is to maximize their own profits. So after teaching employers all of their best cost-shifting tricks over the last few decades, they are exploring other revenue-generating options.
What’s Going on With the Big Health Insurance Companies?
The rollout of Obamacare provided large health insurers with a glimpse of their future. This future includes greater competition and less bargaining power with providers. There are several telltale signs of these changes, but here are four that get my attention.
- They no longer have the benefit of price secrecy as their competitors can now see how they price their products on federal and state exchanges
- They are struggling to maintain their networks and bargaining position with medical providers and hospitals as these entities consolidate
- They let private employee benefit consulting firms like Aon Hewitt, Towers Watson and Mercer take the lead in the private exchanges movement. I am not convinced their hearts are in it and believe the only reason they are creating their own exchanges is because their competitors are, and
- They are looking more like IT companies than health insurers...
Employee benefit innovation works like a game of follow the leader. This is how it typically goes... In an effort to save money, benefit pros at large employers work closely with brokers and insurers to make changes to their employee benefit plans. Sometimes these changes develop into new products. Insurers market these product innovations to medium to small size companies and soon everyone is using the same products.
For example, about a decade ago large employers implemented workplace wellness programs in an effort to constrain healthcare cost. Eventually insurers and their wellness vendor partners developed their own wellness program products. Today “wellness benefits” are a standard part of health plans.
A New Day for Employee Benefit Innovation
As companies continue to shift healthcare cost increases to employees, there will come a time when employees say we can’t handle another increase. Employees will demand other options and top benefit pros will deliver. One option that may be an even better cost saver than wellness programs or consumer driven health plans is a price transparency program.
Now, there are several price transparency tools out there; I have written about them before and have several listed on my website. But I do not know of one comprehensive workplace-based price transparency program. Maybe there are a few but I am not aware of them. But if I am right about this being a new concept in workplace healthcare cost control, let me provide a few reasons why they are more effective than workplace wellness programs.
- They do not involve significant behavioral changes
- They get right to the root of the problem--the price of care
- They do not discriminate and are not controversial
The best employee benefit pros know the importance of benchmarking their benefits program. The employee benefit pro who cannot answer questions and provide data affirming that the company’s plans are on par or better than the industry, quickly loses credibility and maybe their jobs. Fortunately, there is a lot of reputable data out there for benefit pros to consult; unfortunately, too many rely on one source of data for all of their benchmarking needs.
Benchmarking is not the only use for employee benefit surveys. These surveys keep benefit pros in-the-know regarding industry trends and employee opinions about benefits they receive. However, counting on one survey to benchmark and track trends and opinions is not a good idea. To get all the benefits that survey data can provide benefit pros need to use several different surveys from several different sources.
There are many groups that conduct employee benefits surveys, including government, non-profit organizations, employee benefit consulting firms, TPAs and investment companies, professional associations and major health insurance companies.
Non-profit Organizations – Kaiser Family Foundation, Employee Benefit Research Institute
Consulting Firms – Aon Hewitt, Mercer, Segal, Buck Consulting, Milliman, Inc., Towers Watson & Co., The Segal Group, Hay Group, etc.
Third Party Administrators and Investment Companies – ADP, CBIZ, Ceridian, WageWorks, TIAA-CREF, Fidelity, Vanguard
Professional Associations/Organizations – SHRM, IFEBP, IPMA
Major Health Insurance Companies – Aetna, Cigna, Unitedhealth, Kaiser, Wellpoint, Highmark, BCBS, Humana
A major criticism trending in the employee benefit arena is that tax-advantage retirement plans (mostly the 401(k))-style ones) benefit higher paid workers. Progressive politicians and academics continue to propose changes to these plans. Individuals defending the current tax structure of workplace employee benefits rebuke these proposals by pointing out their technical inaccuracies. They claim that the tax features of these plans are equal and fair because they are subject to annual non-discrimination (ND) testing. This battle is not going away benefit pros, and if you conduct your own non-discrimination testing, you are right in the middle of it.
What is Non-discrimination (ND) Testing?
As you can imagine, non-discrimination testing is a complicated process that actually consists of multiple tests. However, basically, its purpose is to determine if highly paid and key employees benefit more from the plan than lower paid employees. It can be difficult to understand what these tests mean unless you perform or assist in performing them yourself. But that is not my main concern here. If non-discrimination testing is what proponents of 401(k)-style retirement plans want to use to claim they are equal and fair, let’s talk about why this may not be true for one simple reason. And what is that reason…? Well, the data used to perform the tests comes from the employer and its accuracy is questionable.
I want to meet the employer willing to testify under oath that the data they gather to conduct non-discrimination testing for any of their qualified employee benefit plans is 100% accurate. I say this because I know from experience that gathering this data is not a simple process. In fact, it’s often difficult. Why? Well, it usually requires the assistance of others from the Payroll and Information Technology departments. Which means providing these folks with an understandable explanation of data needs and timetables. Continue Reading...